New Jersey board advances three gas-fired plants

HOUSTON Tue Mar 29, 2011 7:13pm EDT

HOUSTON (Reuters) - New natural gas-fired power plants proposed by NRG Energy Inc, Hess Corp and Competitive Power Ventures moved closer to reality on Tuesday under New Jersey's long-term capacity pilot program, the New Jersey Board of Public Utilities said.

The three facilities, with capacity totaling 1,949 megawatts, were the first selected to obtain 15-year contracts under a controversial state law designed to encourage new power-plant construction by offering developers long-term, ratepayer-subsidized contracts.

The Long-term Capacity Agreement Pilot Program "will result in improved reliability for New Jersey ratepayers while providing rate relief for the next 15 years," estimated at $1.8 billion, said Lee A. Solomon, BPU president, in a statement.

The Old Bridge Clean Energy Center, a 660-MW combined cycle gas plant to be built near Old Bridge, New Jersey, is a project of NRG's New Jersey Power Development LLC and is expected to be operational beginning in 2015.

CPV Shore LLC will build a 663-MW gas plant near Woodbridge, also to be operational in 2015, while Hess Newark LLC will build a 625-MW gas plant near Newark to go online in 2016, BPU said.

After Tuesday's 4-0 vote, developers will begin negotiating contracts with New Jersey's four electric utilities, the board said.

"We look forward to working with the BPU and the New Jersey electric distribution companies to move our Old Bridge Clean Energy Center project forward," said Drew Murphy, president of NRG Energy's Northeast Region, in a statement.

New Jersey Governor Chris Christie signed a bill in January to promote construction of new power plants as a way to make electricity more affordable in a state with some of the highest costs for power in the nation.

Private developers supported the law due to the difficulty in financing new plants without a long-term contract. Environmentalists and the state's largest utility opposed the law.

Sponsors of the legislation said New Jersey ratepayers pay up to $1.9 billion a year to cover regional power grid operator PJM's capacity costs and congestion charges needed to import power from other states.

Under PJM's capacity market, generating companies receive capacity payments to keep plants available now and in the future.

Critics included the Sierra Club environmental group and Public Service Enterprise Group Inc, the state's biggest power company.

PSEG, which owns several power plants in New Jersey that receive PJM capacity payments, argued the bill was an energy tax that would cost ratepayers more than $1 billion a year.

(Reporting by Eileen O'Grady; editing by Sofina Mirza-Reid)